MAS Again Reminds Banks To Check Sub-Prime Exposure

Source : The Business Times, August 25, 2007

Remark comes after DBS says exposure more than thought

(SINGAPORE) Singapore's central bank yesterday reminded banks for the second time this month to take a close look at their books, after the city-state's biggest lender DBS admitted greater exposure to US mortgage debt.

Four of Asia's biggest banks, including DBS and Bank of China, have revealed bigger-than-expected exposure to the US sub-prime mortgage crisis, prompting investor fears that Asian lenders were not as immune as hoped.

'MAS continues to monitor the development of the US sub-prime market and the financial institutions' exposure to this sector as part of our market surveillance process,' the central bank said in an email to Reuters.

'We also continue to remind (financial institutions) to factor in the current environment into their regular stress testing and take appropriate action where necessary.' The comments by the Monetary Authority of Singapore were prompted by DBS Group Holdings' admission yesterday that it has nearly double the direct exposure to collateralised debt obligations than previously declared.

Shares in DBS fell more than 2 per cent after it was disclosed that it had more holdings than initially declared. Broker CLSA had said in a report this week that while Singapore banks have limited exposure to collateralised debt obligations, DBS may have $2.4 billion worth of CDO holdings - nearly double the $1.3 billion direct exposure it had initially declared.

It said DBS may have more direct CDO exposure through a special-purpose vehicle that had commercial paper backed by $1.1 billion worth of CDOs, with the paper due for renewal.

A DBS spokeswoman confirmed the figures in CLSA's report but said: 'We are comfortable with our exposure to the conduit.' Macquarie Bank said if DBS holds the CDOs to maturity, it should not see significant losses from marking to market. -- Reuters